The National Energy Regulatory Council (NERC) has approved the description of terms and conditions for the allocation of quotas for the promotion of electricity from renewable sources, in which the 0.7 TWh promotion quota is established, as well as the reference price – 42.04 EUR/MWh.
These were some of the last steps of the auction preparations. The auction will be announced on 29 May 2020. The first meeting of the Auction Committee will be held on 25 August 2020.
Reference and maximum prices
The reference price estimated for renewable sources for this year auction is 6.7% lower than the one used in the auction last year (45.07 EUR/MWh). The reference price is established based on the electricity prices in the exchange of the last 3 years, i.e. it is a price that the economic entity can expect to receive when trading electricity, produced from renewable resources, in the exchange.
Essentially, the greatest impact on the lowered price was made by the lower electricity price; it was established by assessing the future tendencies of electricity purchase prices based on prices of electricity traded in the exchange; on lower futures of electricity prices; on lower prices of allowances.
On 23 April 2020, NERC approved the maximum price – 45.06 EUR/MWh, which, after assessing the costs required for energy production from renewable sources when using the most efficient technologies, also was reduced by 7.9%.
The reference price and maximum price are used for estimating the maximum price premium for the winning exchange price; price premium is the difference between the maximum price and the reference price. The maximum price premium, for which the auction is held, this year amounts to 3.02 EUR/MWh (last year it was 3.86 EUR/MWh).
Participants of the auction can provide their bids for the preferred price premium (it cannot be higher than the maximum price), while the winning bid is selected based on the proposed lowest price premium.
Example of an incentive scheme: maximum price, reference price and price premium to be paid to the winner(s)
The specific price premium paid to the winning bidder will depend on electricity prices on the exchange. However, in any case, it cannot exceed the maximum price set by the NERC, i.e. if the energy price is higher than the established maximum energy price, the premium is not paid since the economic entity covers the costs by the price obtained from the exchange. Promotion is provided for 12 years.
Auction stages planned by the NERC